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The Employees' Retirement System of State of Hawaii ex rel. Jackson v. Clarion Partners, LLC

Court of Appeals of Illinois, First District, Sixth Division

March 24, 2017

THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII and THE STATE OF HAWAII ex rel. STEPHEN JACKSON, Plaintiff-Appellant/Cross-Appellee,
v.
CLARION PARTNERS, LLC, and ING CLARION REALTY SERVICES, LLC, Defendants-Appellees/Cross-Appellants.

         Appeal from the Circuit Court of Cook County. No. 12 L 11919 Honorable Sanjay T. Tailor, Judge Presiding.

          JUSTICE DELORT delivered the judgment of the court, with opinion. Presiding Justice Hoffman and Justice Rochford concurred in the judgment and opinion.

          OPINION

          DELORT JUSTICE

         ¶ 1 Plaintiff Stephen Jackson filed this qui tam lawsuit under Hawaii's false claims statute, Haw. Rev. Stat. § 661-21 et seq. (2014) (Hawaii False Claims Act), against defendants Clarion Partners, LLC, and ING Clarion Realty Services, LLC. The circuit court granted summary judgment to the Clarion defendants. Jackson appeals that decision. The Clarion defendants have filed a cross-appeal claiming that the court erred by denying their request for certain costs which they contend were recoverable under Hawaii law. We affirm.

         ¶ 2 BACKGROUND

         ¶ 3 The following facts are drawn from the pleadings and the evidence produced during discovery and presented to the court at the summary judgment stage. Plaintiff Stephen Jackson is a licensed Illinois real estate broker. The Employees' Retirement System of the State of Hawaii (HERS) is a Hawaii state agency responsible for providing retirement benefits for Hawaiian state and county government employees. Defendant Clarion Partners, LLC (CP), is an Illinois limited liability company in the business of providing investment advice to institutional investors, such as pension funds. Defendant ING Clarion Realty Services, LLC (CRS), is an Illinois limited liability company in the business of providing property management services. Before 2011, CP and CRS were owned by ING Bank. In 2011, CP purchased its assets from ING Bank. CRS remained part of ING Bank.[1]

         ¶ 4 In October 1997, HERS entered into a contract with CP. The contract provided that CP would "acquire, operate and dispose of interests in real estate" for HERS in a manner consistent with the contract itself, the State of Hawaii's real estate guidelines, and an "Annual Tactical Plan." The contract stated that CP would, among other things, (1) negotiate the terms and conditions of the sale of properties, (2) execute closings, (3) oversee properties CP owned for HERS, and (4) collect rents. The contract stipulated that any property acquired by CP for HERS's benefit be held in "limited liability entities" as permitted by Hawaii law. In accordance with this provision, CP and HERS formed a limited partnership named CP/HERS LP, with CP as the general partner and HERS as the limited partner. Additional CP/HERS LPs were formed to manage each individual property CP acquired for HERS pursuant to the contract.

         ¶ 5 The contract also included a procurement form entitled "General Conditions" which the State of Hawaii used in its contracts. Three of its provisions are pertinent to this case. Paragraph 35 required CP to "comply with all federal, state, and county laws, ordinances, codes, rules, and regulations" that may "in any way affect" CP's performance of its contractual obligations. Paragraph 2(d) stated that CP was "responsible for obtaining all licenses, permits, and certificates that may be required in order to perform this Agreement." Paragraph 3(b) required CP to "ensure that [its] employees or agents are experienced and fully qualified *** and that all applicable licensing and operating requirements imposed or required under federal, state, or county law, and all applicable accreditation and other standards of quality generally accepted in the field of the activities of such employees and agents are complied with and satisfied."

         ¶ 6 After the contract became effective, HERS allocated $100 million to CP, which CP in turn used to acquire ten properties located in Massachusetts, Texas, Florida, Virginia, Washington, D.C., and Northbrook, Illinois. The Illinois properties were acquired on January 7 and July 1, 1998. They were owned by CP/HERS Northbrook, a CP/HERS LP established specifically for their administration and management.

         ¶ 7 In 2006, CP began the process of selling HERS's real estate portfolio. In connection with that task, CP-in its capacity as general partner of CP/HERS Northbrook LP-hired HiGroup, a real estate brokerage firm, to broker the sale of the HERS property located in Northbrook. At the time, Jackson was employed by HiGroup. In April 2007, before the sale of the Northbrook properties closed, a commission dispute arose between Jackson, HiGroup, and CP. That dispute culminated with Jackson filing a lawsuit against HiGroup and CP in the Circuit Court of Cook County. See Jackson v. HiGroup, 07 L 8058 (Cir. Ct. Cook Co.) (Jackson I).

         ¶ 8 In Jackson I, Jackson brought, among numerous other claims, a claim for breach of contract, promissory estoppel, and a violation of the Whistleblower Act (740 ILCS 174/1 et seq. (West 2014)), against HiGroup and its executives, and a qui tam claim against CP and CRS on behalf of the State of Illinois. In the qui tam claim, Jackson alleged that CP, which was not a licensed Illinois real estate broker, engaged in conduct which constituted the performance of "licensed activities" under the Real Estate License Act of 2000. 225 ILCS 454/1-1 et seq. (West 2006) (Act). The circuit court struck Jackson's qui tam claim without prejudice in December 2008.

         ¶ 9 In an amended complaint, Jackson again brought a qui tam claim on behalf of the State of Illinois alleging that CP had violated the Act. Among other things, Jackson alleged that (1) by virtue of its "activities as property manager, " CP was required under the Act to obtain a real estate broker's license and (2) CP had also violated real estate licensing laws that were similar to the Act in Hawaii, Texas, and Massachusetts, insofar "as they related to the various ING[2]entities and employees involved in the Northbrook Property."

         ¶ 10 In May 2009, the circuit court dismissed the qui tam claim in Jackson's amended complaint, without prejudice, pursuant to section 2-615 of the Code of Civil Procedure (Code). 735 ILCS 5/2-615 (West 2008). Jackson did not replead his qui tam claim. In January 2012, Jackson I proceeded to a jury trial on Jackson's breach of contract, promissory estoppel, and whistleblower act claims against HiGroup and its executives. The jury ultimately returned a $183, 588 verdict in Jackson's favor on his promissory estoppel claim against HiGroup.[3]

         ¶ 11 On October 18, 2012, Jackson filed this lawsuit against CP and CRS under the Hawaii False Claims Act (Haw. Rev. Stat. § 661-21 et seq. (2014)) on behalf of HERS and the State of Hawaii. (We henceforth refer to this case as Jackson II.) As in Jackson I, Jackson once again brought a qui tam claim against CP and CRS-though this time, under the Hawaii False Claims Act (rather than under Illinois law) and on behalf of the State of Hawaii and HERS (rather than the State of Illinois). And, just as in Jackson I, the central premise of the qui tam claim in Jackson II was Jackson's allegation that CP and CRS, "[d]espite not being licensed as required under the [the Act] and under the laws of other states, *** ...


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